Smart Move

[Andy the Actuary]

The sustainability of Social Security is at issue so it makes perfect sense to reduce the employee's tax rate from 6.2% to 4.2% for 2011. Hey, and the SS deficit: Just for a thrill, add another "tril!"

[masteff]

Just for a thrill, add another "tril!"

That's a good line! I'll definitely have to re-use it!

I agree that the behaviour of Congress is very frustrating to those of us who actually understand things like funding a retirement plan. Guess I'll have to add a grand or two this year to my personal savings to further offset the inevitable failure of SS.

Oh, but wait! I'm supposed to spend it on disposable goods to stimulate the economy! Maybe I'll just add back that latte a week that I've been skipping as suggested by all the "how to save money" articles on the interwebz.

[XTitan]

The sustainability of Social Security is at issue so it makes perfect sense to reduce the employee's tax rate from 6.2% to 4.2% for 2011. Hey, and the SS deficit: Just for a thrill, add another "tril!"

Now now - the SS trust fund is supposed to be made whole via transfers from the General fund, and the IRS did get out guidance today, so they are being thoughtful (yeah, I don't think I can say this with a straight face...)

[david rigby]

Has anyone in DC taken (and passed) Econ 101?

[Belgarath]

No, but they did take a business course or two:

B101 - Money can make you rich

B203 - Tax shelters for the indigent

B104 - Fractured Actuarial Science

[Andy the Actuary]

New perspective:

Fricks makes a 1/4 pound jumbo frank. It is a smorgasbord of swine viscera. Anyway, Shop & Save is the only game in town for obtaining this treat. I go over there today and it is packed and I am observing the clientele. They look very old, tired, and beaten-up. They very much look like the 2% FICA rate reduction -- for those who are working -- is a blessing from the Big Guy, himself. I worry that this will be our daughter in 15 years. I remember why I voted for Obama. I feel terminally guilty for feeling the way I did this morning. Nonetheless, I'm inclined to vote Republican next election.

[vebaguru]

Thank you for wearing your beanie. It helps us keep things in perspective.

[GMK]

Thank you for wearing your beanie. It helps us keep things in perspective.

Thanks for pointing that out. It's true, and it helps overcome the frowning.

BTW, shouldn't there be some kind of Tea Party protest about this borrow and spend package?

or is "fiscal responsibility" just a campaign phrase, soon forgotten, especially by the speaker.

[K2retire]

BTW, shouldn't there be some kind of Tea Party protest about this borrow and spend package?

or is "fiscal responsibility" just a campaign phrase, soon forgotten, especially by the speaker.

Since the package was primarily at the insistence of the Republicans, who also claim the Tea Party, we have a bit of contradiction here, don't we?

[Andy the Actuary]

"insistence" has an interesting connotation. The Japanese insisted we sell them oil. We repudiated their insistence. We went to war.

Is it better for Congress to get the wrong* thing done rather than get nothing done?

*wrong is in the eyes of the beholder. We can argue that 2% off Social Security Tax Rate benefits far more people than 2% off the general tax rate. The other side is will 4.2% ever increase back to 6.2% and what both short and long-term effects will this have on the viability of Social Security unless offsetting changes are enacted.

[Bird]

Repeating what XTitan said, this does not impact SS. "They" are reducing SS taxes but making it up from general revenues (in reality, borrowing). (I'm not saying it's ok.) I'd love to get inside the heads of the people who think this stuff up.

I'm in the camp that thinks, if you get yourself in trouble by borrowing, it's not the greatest idea to borrow even more. Words like "insane" "disgusting" etc. aren't really strong enough. We need a new vocabulary.

[Jim Chad]

I don't think there will be much of a protest. From what I have seen, "us TEA Partiers" tend to use the term "cut spending" rather than "fiscal responsibility".

Because if we used "fiscal Responsibility" people might twist that into an excuse to raise taxes.

[masteff]

Because if we used "fiscal Responsibility" people might twist that into an excuse to raise taxes.

But why did that become such a taboo thing to do??? Reagan used the Laffer Curve to justify cutting the top rates from 70% to 28%. People remember that cutting taxes worked okay under Reagan, therefore (and here's the logic error) it must be okay to keep cutting taxes. It worked for Reagan but it didn't work for Bush Jr because we'd already moved from the right-tail to the left-tail of the Laffer Curve... further reduction only has the effect of reducing revenue.

Try this mental excercise.... a man named Uncle Sam walks into your bank and asks for a loan. Last year, Sam had gross annual income of $2.38. Further, Sam has outstanding debts of $13.89. Would you loan Sam another $1.00? Now suppose that you happen to know that Sam is living beyond his means and is spending $3.55 per year; would you loan him $1.00?

While I accept that that Sam's spending needs to be brought inline with his income, the problem is he has no ability to service his debt without increasing his income. The only way for Sam to increase his income is higher taxes.

The biggest problem in Washington is the thinking that a budget surplus must be "returned to the people".... no, it must be used to repay the budget shortfalls we ran in years prior.

I take a $100,000 loan to a start a business and the first few years are tough but then business picks up and I'm making a profit. Do I then fail to repay my business loan? No, I used it to get economic prosperity and when that prosperity arrives, I have to use the excess to repay the loan that got me there.

</soapbox>

[Belgarath]

What's a "budget surplus?" And I mean a REAL budget surplus, not one using government accounting that doesn't count the trillion or so spent in Iraq or Afghanistan, etc..

I think I'll be unlikely to see one in my lifetime.

And while I generally try to avoid political statements here, I feel comfortable when I'm trashing both parties. I see no difference in "fiscal responsibility" of the Democrats or the Republicans in Washington. They are all useless. Only difference is the emphasis on where the money goes. The great thing here is that "WE THE PEOPLE" elect them, so we as a country are collectively idiots, and we will pass on the consequences to our children and grandchildren. Ah well, off the soapbox - tis the Holiday season, so my rantings are inappropriate, and I'd like to wish you and your families and friends a wonderful season - and let peace and goodwill reign supreme!

[GMK]

I agree, especially:

Only difference is the emphasis on where the money goes.

Is there any way we can make them fiduciaries?

Happy holidays to everyone, and best wishes for a happy 2011.

[Andy the Actuary]

Is there any way we can make them fiduciaries?

Ahhhhhhhhhh. You would like them to live by the rules they legislate? Oh my. In such case, we could not be the 100% confident we are today that they eschew their self-interest and act strictly to our benefit!!!!

[Bill Presson]

The only way for Sam to increase his income is higher taxes.

</soapbox>

Here is the rub. We don't need higher taxes, we need higher tax REVENUE.

The Republicans haven't done a very good job in a long while in making the distinction. Or in being prudent with spending when they have some control.